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Article compiled  by: White Nation  correspondent Johannesburg – March 09 2017






“IN DECEMBER, South Africa’s Government (Tina Joemat Petersen et al) sold its entire strategic fuel reserve, 10m barrels of crude oil, at a substantial discount to the price at which the commodity traded. It was a stinky transaction. Firstly, the oil market is in a contango, a period where selling oil for future delivery translates into a progressively higher premium over the spot price. So the further forward you contract the sale and delivery of the oil, the higher the price. Yet SA’s reserves were sold with immediate effect. For another, the country dumped its oil reserves at $28 a barrel, at least $10 below the market price ruling at the time. Plus there is no international precedent – to our knowledge this is the first time any nation on earth saw fit to expose itself to actually having no oil reserves. The International Energy Agency suggests countries hold 90 days of net imports in their strategic stockpile. To get to the bottom of the issue, I approached an international oil trader. He spoke on condition of anonymity. His conclusion is clear: those who engineered the sale of the country’s strategic fuel fund on the conditions reported, did it solely to enrich themselves. They stole at least R1.5bn, perhaps as much as R2.2bn, from South African taxpayers. Guess we have an #Oilgate on our hands.”   – Alec Hogg

The Zuma Administration’s attempts to cover up the Oilgate rip-off rest with claims it was a “rotation” of the oil stocks with Energy Minister Tina Joemat-Pettersson maintaining the oil is still in the Saldanha tanks and available. Her lie is about to be well and truly unmasked.Bloomberg quotes “five traders familiar with the matter” saying the world’s biggest oil merchant, Dutch group Vitol, is offering to sell and ship some 4m barrels of its Saldanha-stored oil – almost half of what used to be SA’s strategic reserves. Can’t wait to hear what cock and bull story the Zuptas will concoct when Vitol’s tankers arrive to collect the company’s cheaply acquired asset.

I’m with an experienced international oil trader who has agreed to talk on condition of anonymity. Let’s start at the beginning – what exactly is a Strategic Fuel Fund and why does a country need one?

“Strategic Petroleum Reserve Agencies (in SA’s case, the Strategic Fuel Fund) have been around since the late 1970s and as a response to oil supply disruptions brought about firstly by the Arab oil embargo and after that the Iranian Revolution. OECD Governments acting through the International Energy Agency imposed policies to hold roughly 90 days of net oil (crude oil and refined petroleum products) imports as strategic stocks to have adequate crude oil and/or refined petroleum products to meet any future major supply disruptions, whether caused by geopolitical events or natural disasters.”

During Apartheid, did South Africa have a bigger oil reserve than most – and post 1994 has that been reduced?

“Yes. While secrecy governed the levels of SA’s reserves of crude oil under Apartheid, it is believed that South Africa would at one stage have had significantly more than 90 days of net imports of crude oil stored inland in disused coal mines as well as in Saldanha Bay, which is a major storage depot/hub that can hold more than 40-million barrels of crude oil, a facility built in the Apartheid era. Presumably in response to political changes as well as understanding you could never justify having that much oil sitting around, South Africa started to work the reserves down during the 1990’s to just over 10-million barrels – it has been common knowledge that the stock level reached this level before the end of that decade, and at which level the reserve has remained ahead of the recently reported sale.”

How many days of usage was the 10-million barrels of strategic reserves?

“As South Africa imports around 400 000 – 450 000 barrels a day of crude oil on aggregate, the strategic reserve translates into around 22 – 25 days of crude oil imports. If you add refined petroleum product imports of around 300 – 400 000 barrels a day, then the reserve count drops to 11- 14 days of net liquid fuels imports.”

Where exactly were these strategic stockpiles held?

“In the Apartheid era it was held mainly inland in old coal mines. The rest was at Saldanha Bay, which by global standards is a very large (and now well-known) crude oil storage and trading facility.”

South Africa has sold its strategic fuel reserves, those 10-million barrels. Are there international precedents for this?

“No, not for a net sale of a substantial part, or all of the stocks, or a sale of almost any volume which is not linked to a planned or hedged replacement of the oil sold. There are international precedents for countries net selling their gold reserves but never for a strategic reserve commodity such as oil. Most governments are increasing strategic stocks of oil – China and India being notable examples of significant stockpilers. Also several Eastern European countries that have joined the EU are obliged to build up reserves and hold 90 days of net imports as reserves. There is no precedent of disposing of the nation’s entire oil stocks as South Africa has done.”

Therefore, this would have surprised oil traders like yourself?

“Yes indeed.”

Is the rationale that was given for the sale of these oil stocks by the South African government one that makes sense?

“No- but a rotation  that is not borne out by the media reports where, if you look at the statements made by the Minister of Energy (Tina Joemat-Pettersson), members of the Department of Energy and the Strategic Fuel Fund, this was a sale and not a rotation. If this was a rotation, then the second leg of the transaction – the plans, contracts and prices related to the replacement oil, would need to have been concluded simultaneously. Therefore to present it as a rotation to any oil trader is not credible. In the current market circumstances where the market is in contango – future oil prices progressively higher than the current spot oil prices – you wouldn’t sell your oil stocks promptly and you wouldn’t exchange current oil for future oil. Because replacement oil bought for delivery in the future is already more expensive the moment you dispose of your current oil. By selling the strategic stocks now and leaving the timing of purchasing replacement oil open, the Government has furthermore left itself wide open to increases in the market price of oil which exceed the contango at the time that a replacement decision is made – as has indeed since happened. No oil trader would believe that the construction of a stock rotation can be placed on the transaction that has been reported. Therefore the obvious question is why sell the reserves in this way, now?”

Do you have any idea?

“First look at what is reported about the price that was achieved and the timing. If in December if you had sold the oil for a future delivery you could, depending on the date(s) on which the oil sale decisions were made, have captured anything between 10 and 15 percent more over the following 12 month period in US$ terms, than the spot price. If the US$ revenue stream had been sold forward against the Rand, a further 5-6% premium may have been secured in Rand terms. And if you then look also at the (sometimes contradictory) statements made to the media by various officials about the level of storage fees being paid by parties who bought the oil, then the only sensible answer is why was so much taxpayer’s money left on the table? You cannot escape the conclusion that there was a corrupt purpose.”

How much money was left on the table?

“By our reckoning, at least $100-million or US$10 per barrel, perhaps as much as US$15 per barrel – regardless of whether you use the US$/ZAR exchange rate of the time or now, that’s at least R1.5 Billion. The oil reserves were sold for a purpose we don’t understand, at a price we don’t understand and at a price that no professional oil market participant would understand.”

It sounds illogical unless that $10 a barrel went into someone’s pocket?

” Absolutely. I’m not commenting on the poor timing of the sale (oil prices in December were particularly low) or on the unprecedented decision by the South African Government that right now, they don’t need a strategic stockpile of crude oil and have to sell it promptly. The proceeds of the sale are reportedly sitting in an account somewhere, so if the urgency did not relate to the sale proceeds, there must have been an urgency about the deficit…So the issue, rather, is if you have consciously decided to sell the stockpile, why do it in the manner that it was done when there are many other alternative routes available to raise revenue (by borrowing against the stockpile) and/or rotating the oil.

The South African government is telling its citizens the country has not lost a strategic stockpile. The oil is in fact still there for the moment. But the country doesn’t own it anymore. The new owners are just storing it there for the moment as having bought the oil in December, they will have immediately sold the oil forward for future delivery and fixed/hedged a price which is at a premium to the cost of storage and financing that oil. The odds are that this oil will be exported, like so much oil which is being stored in Saldanha Bay.

The government is arguing that because the oil is currently in Saldanha the country still has access to a strategic stockpile. But the issue is twofold – the South African Government can buy oil from anyone presently storing oil in Saldanha Bay and it has gone from being an owner of the oil to somebody who will have to buy it at the prevailing market price if or when the country needs it in future. And there is nothing to stop the new owners from removing the oil as and when they choose – which they are likely to do when market conditions change.

crude oil

Who bought the oil?

“If you look at the reports, two major international traders and one other relatively small trading company. Glencore and Vitol are reputable, capable, financially sound businesses. The other one involved is a company called the Taleveras Group which has seen some media reports and market talk of a more troubled recent history, which SFF will or should have been aware of.”

These companies bought the 10-million barrels of strategic oil reserves at least at $10 a barrel discount?

” It’s very easy today to price oil. Markets are well-serviced by reporting agencies and therefore markets are transparent for most of the major traded grades, including the grades of oil that are generally known to have been stored by SFF in Saldanha Bay. While different grades of oil vary significantly in price at any one point in time, the value of that oil on any one day is transparent – you can often tell how much of that oil has been traded and the actual traded price-formula. Provided the pricing dates that were applied in the contracts of sale are known, any ten traders will tell you within plus or minus 20 cents a barrel what that oil would have been worth in Saldanha Bay as a spot sale – the price delivered including shipping costs on the days it was sold. That’s one element of the disparity between the reported sale prices achieved and what the market would suggest.

South Africa’s Strategic Fuel Fund also had the choice of either selling at that moment or selling the oil for future delivery. In other words, SFF could themselves have extracted a significant premium simply by selling for future delivery. Why not do that if the oil’s sitting in your tanks and you can get 15 to 20 percent more 12 months out than if you sell it to somebody today? You could even get a significant part of the cash today at a relatively modest US$ interest rate discount to the future value if the government needed the money to spend elsewhere. Why forego such an enormous premium? So it’s not only the disparity on the price of oil at the time the stockpile was sold. There was also a significant premium that the country should have received for selling it forward.”

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( It appears this ANC criminals have a BIIIIIG apatite for stealing oil! AND we pay through our NECKS for 1 liter of petrol after they AGAIN steal our money through hidden fuel “taxes!”  The buggers simply cannot STOP stealing from us! Shall we ever forget Pneul Maduna and HIS skulduggery into or oil reserves as well? All these  “energy” ministers truly seems to have black fingers…now don’t they? Now you and me try the same stunt- and see where WE end up…but THEY get away with it. These communist political thieves are deliberately undermining the constitution and legal system by merely enforcing political muscle power onto the legal judiciary when caught .  Then they simply get away with it after they have stolen literally MILLIONS from the people of the country. HOW THE HELL DO YOU ALLOW IT?  They would not allow YOU to steal millions and get away with it…so- how come they are not arrested as we do- and appear in a court of law and get jailed as we do? Because they are ” politicians???” And still they get away with it- “protected” by political “indemnity” – “untouchable”-  and the secret black Nguni ” Brotherhood.”  Such did the ANC and NP thugs emptied the Reserve Bank of R 4 TRILLION of gold…our COUNTRY’s gold- and now we suffer with a petty weak worthless currency with a bloody smiling joker’s face on it all while the thieves of  CODESA class 1994 retired with millions in the bank- still walking free and joining Shabir Shaik’s merry gang of golfing schmuks every Saturday. ! What crap is THIS? From the SAA, ESCOM, SABC, Oil , State pension fund and God knows what else- whatever these political thugs touch- they STEAL! When will the dumbstruck naive public going to stand up and demand JUSTICE instead of non-productive bourgeois ” boards of inquiries” to take on these scrupulous political thieves? What a lot of communist thieving hippocracy!? -Ed)